An ongoing fight will decide whether small-business owners can provide online content and services to consumers at speeds similar to bigger competitors without having to pay more for the privilege. The Federal Communications Commission has asked a federal court to let it regulate Internet service like a telecommunications utility to ensure an open Internet. Among the powers the regulator seeks is the ability to bar Internet service providers from providing faster delivery of content from affiliated suppliers.
Although this may not sound like a big deal, it could be one if the FCC is prohibited from enforcing its net neutrality rules, according to Brooklyn Law School professor Jonathan Askin. The problem, Askin claims, is that the owner of the last mile of wire or fiber connecting a business or home to the Internet can use its powerful position to favor or deny specific Internet services and content.
There has been some of this in the past. Big telecom companies tried to block videoconferencing provider Skype, and a group of financial service companies wanted to create a mobile payments platform. (Cable TV companies have also sought to hamper BitTorrent traffic.) In the future, Internet service providers who have invested in content creators, such as TV or film studios, can be expected to block or slow down access by competitors, while favoring their own content.
The Open Internet Principle
So far, Internet service providers have been somewhat restrained in their attempts to favor or disfavor specific Internet content and uses, Askin points out, but that restraint may evaporate if the FCC isn’t allowed to require equal treatment. And that will likely stifle innovation among small businesses that want to provide content and services over the Internet.
Askin likens the open Internet principle to the way electric utilities are prohibited from charging different prices for power delivered to appliances made by different manufacturers. “You can attach whatever you want to your electric pipe," he says. "You should be able to attach whatever content you want to your Internet pipe,” he says.
FCC Commission Chairman Tom Wheeler, a former venture capitalist, is a major force behind the drive for net neutrality. "There has to be a level playing field of opportunity for new ideas,” Wheeler said in a statement. “Small companies and startups must be able to effectively reach consumers with innovative products and services and they must be protected against harmful conduct by broadband providers.”
Net neutrality maintains a level playing field for small businesses, agrees Sharon Rowlands, CEO of Woodland Hills, California-based online marketing company ReachLocal. “It does so by preventing larger businesses with more resources from gaining a competitive advantage over small ones by paying extra money for faster delivery of their ads and other marketing content,” Rowlands says.
Not everybody agrees with the FCC’s approach. Ajit Pai is one of two members of the five-person Federal Communications Commission who opposes the chairman’s approach. The commission lacks legal authority to enforce Wheeler’s vision, Pai claimed in a dissenting statement. In any event, he suggests regulation will not boost innovation, constrain pricing or encourage carriers to invest in networks. “This brave new world will deter new entrants and reduce competition in the broadband market,” Pai said.
The legal challenges to the FCC’s past attempts to enforce an open Internet have been mounted by giant telecom companies. In one such case decided in 2014, the FFC won the right to require Internet service providers to be transparent about how they charge and manage traffic, but was denied the ability to keep providers from blocking or slowing access to certain content. What the commission is doing now is trying to gain that right by restating its plan under a different area of the law governing regulation.
Askin, for one, thinks the FCC will prevail in court this time. However, he notes that the FCC has said it won’t try to regulate rates providers charge for Internet service. “That’s a hole you can drive a truck through,” Askin says, predicting that under net neutrality Internet service will cost small businesses more, although no one knows how much more.
Rowlands of ReachLocal agrees that there is uncertainty about costs. “The current plan is very broad and does not get into the nitty gritty of how it’s enforced,” she says. “I think we’re going to have to wait and see how the FCC plans to enforce this, especially with regard to pricing.”
However, she also thinks that without net neutrality, small- and medium-sized businesses will become Internet also-rans unless they pay more for faster access to their content and services. And that won’t be good. “If they are relegated to the slow-lane in a pay-for-speed Internet system,” she says, “the experience SMBs could offer potential and existing customers would be inferior to that offered by businesses in the fast lane.”
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